20 L I C E N S E ! A U G U S T 2 0 0 5

Why and how Harley-Davidson has

maintained consumer brand loyalty.

B Y J O Y C E A N N C O O N E Y

P H O T O G R A P H S B Y PAT R I C E A R G A N T

Why and how Harley-Davidson has

maintained consumer brand loyalty.

A U G U S T 2 0 0 5 W W W . L I C E N S E M A G . C O M 21

THERE’S A MYSTIQUE to Harley-Davidson that riders and even

Harley-Davidson executives rarely can define in a single word. That just

might explain why Harley’s mantra, “It’s a journey, not a destination,” is

as wide open as the road. Indeed, for Harley-Davidson, the journey

is now 102 years in the making, and that journey has amassed avid,

loyal fans and customers who use catchwords such as freedom,

Americana, adventure, edgy, and cool, among countless others, to

describe Harley-Davidson. Those die-hard Harley-Davidson >

fans range in age, vary inincome, are diverse inethnicity, and are global—from the Midwest toJapan; from New York toCalifornia; fromWashington, D.C., toEurope; and countlessother territories world-wide. One need only lookat Harley-Davidson’sstock performance overthe years as affirmation ofthe brand’s equity andcontinued success: In2000, Harley’s stock,NYSE: HDI, split for thefifth time since 1986when its IPO originallybegan trading at $11 pershare.

And although Harley-Davidson, like manyother companies, hasexperienced bumps in theroad, the company cele-brated its milestone100th anniversary in2003 with nearly 1 million people in tow atan event in Milwaukee,WI. Certainly, Harley-Davidson has come along way since 1903,when William S. Harleyand brothers Walter andArthur Davidson hand-crafted their first threemotorcycles in

22 L I C E N S E ! A U G U S T 2 0 0 5

SINCE CHILDHOOD, Paul

has been dreaming about the

day he would own a Harley-

Davidson. Finally, in 1998, he

purchased his first motorcycle, a

Harley-Davidson Softail, and

then in 2003, purchased a

Harley-Davidson Screamin’

Eagle Road King. “If I had the

room, I’d own 10 of them,” he

says. A Wall Street stock broker,

Paul, 39, has customized his

rides by changing pipes and

adding extra pipes, and says he

“spares no expense” when it

comes to his motorcycle. Paul

must own upward of 100 black

Harley-Davidson T-shirts, vests,

boots, jeans, sunglasses, wallet,

key chain, and most recently a

Harley-Davidson tattoo. His

Cadillac features a Harley-

Davidson sticker, and he’s a Franklin Mint Harley-Davidson motorcycle collector.

“This is a passion,” he exclaims, then easily recites Harley-Davidson’s company

history. With a stressful job, Paul rides year-round, weather permitting, and

attends events in Lake George, NY, and Daytona, FL. He’s a member of a motorcy-

cle club, and says there’s a camaraderie among riders, whether you know them or

not, that puts you in the same family. •

Milwaukee. Later that year, a third Davidson brother, William, joined thecompany. Six years later, the Harley-Davidson V-Twin engine was born. AnAmerican-born company, during World War I, Harley-Davidson producedmore than 20,000 military motorcycles to serve allied U.S. forces; it supplied90,000 motorcycles during the World War II effort. Of note, during theGreat Depression of the 1930s, Harley-Davidson and Indian were the soleU.S. motorcycle companies to survive.

Following the wars, demand for motorcycle production was on the rise,and to meet the demand, Harley-Davidson acquired other manufacturing

A U G U S T 2 0 0 5 W W W . L I C E N S E M A G . C O M 23

plants. Moving forward, the company began tointroduce new models such as the XL Sportster, alightweight sporty model, in 1957. In 1965, theperiod of privately held ownership for Harley-Davidson ended with its first public stock offering.Then in 1981, 13 members of Harley-Davidson’ssenior management purchased the company in aleveraged buyout from American Machine andFoundry (AMF), which merged with Harley-Davidson in 1969. That team implemented newquality and manufacturing methods.

Since the 1980s, Harley-Davidson has endured,strengthened, and continued growth—from

acquiring Buell Motorcycle Company in 1998 tointroducing the Harley-Davidson VRSCA V-Rod,the first production motorcycle with a liquid-cooled engine in the company’s history, in 2002,among numerous other accomplishments.

Today, for the Harley-Davidson customer, one of

“Harley-Davidson is a person in disguise.Harley-Davidson appeals to you as anindividual, appeals to your need forescape and adventure. The whole spiritis the ability to take that individuality tocustomization.”

—RUTH CROWLEYVP, GMM, CONSUMER PRODUCTS, HARLEY-DAVIDSON

ASK ALBIE why he returned to riding some five

years ago, and he quickly responds, “It’s the free-

dom. You feel the wind on your face, you can see

the horizon, and it’s incredibly solitary. The road is

wide open, and there’s a mystique about the expe-

rience.” Although he doesn’t mind having someone

along for the ride, he prefers riding solo, alone with

his thoughts. A salesman by profession who lives

in upstate New York (the Catskills area), Albie, 55,

began riding in 1969 and then stopped for a period

of time. His ride, however, must be a Harley-

Davidson (he now owns a Deuce, shown here)

because “it’s the best in my opinion. Harley-

Davidson is synonymous with motorcycles.” When it

comes to Harley-Davidson accessories, he’s clad

from boots to earring. As for his ride, he did cus-

tomize with chrome, pipe changes, and adding a

luggage rack, and says Harley-Davidson has an

extensive line of aftermarket accessories. He

traditionally rides, weather permitting, from the

April time frame through October, and attends

Americade, held in Lake George, NY. •

24 L I C E N S E ! A U G U S T 2 0 0 5

those advancements stands out: Long before “custom” became a TV phenome-non, the FXRS Low Rider joined the Harley-Davidson model line, establishingthe “factory custom” option in 1977. “Harley-Davidson is a person in disguise,” says Ruth Crowley, vice president, GMM, consumer products,Harley-Davidson. “Harley-Davidson appeals to you as an individual, appeals

to your need for escape and adventure. The whole spirit is the ability to takethat individuality to customization.” And while the company believes “every-body” is its customer, there are three distinct consumer target demographicsfor the consumer products sector of the Harley-Davidson business, accordingto Crowley. They include: the real rider and enthusiast, who rides and looksto Harley-Davidson for functional gear such as helmets, gloves, boots, etc.;

those customers who donot ride, but the “brandlifestyle” appeals to them;and the “aspirational”customer who hopes tosomeday own a Harley-Davidson, but in themeantime wants Harley-Davidson-associatedproducts.

License! custom-designedthis feature story as a casestudy and tribute to theHarley-Davidson brand,unique in that for 100-plus years it continuously

has revved its brand exten-sion engine, maintainingbrand-loyal customers bystaying in tune with theirwants and needs in themotorcycle, aftermarket,and consumer productsareas. License! spent sometime talking to Harley-Davidson’s Crowley andTom Parsons, director oflicensing, as well as long-time licensing agent SethSiegel of The BeanstalkGroup. Then, License!revved its own engines.Throughout this story,you’ll meet real riders who range in age and profession, are die-hardHarley-Davidson fans,have customized their

ALTHOUGH AL, 43, has been

riding since 1985, he hasn’t always

owned a Harley-Davidson…there’s

been a Kawasaki and a Yamaha. In

1990, he bought his first Harley-

Davidson, and he now owns two: a

Screamin’ Eagle Deuce and a Road

Glide (shown here). In addition, he

owns a Yamaha V-Max. “I go from a

sport bike to a true touring bike,” he

says. An appliance store owner living in

New Jersey, Al says he spends hundreds

of dollars annually on aftermarket

items such as cleaning accessories and

other merchandise including boots,

sunglasses, and jackets. Asked why he

rides, he describes riding as a “getaway

to release stress and relax.” He’s cus-

tomized his rides by changing pipes

and increasing horsepower, as well as

adding chrome, and he rides at least

once a week even in the winter. A

member of a motorcycle club, at times, Al rides with large groups. Is there anything else

he’d like from Harley-Davidson? “I think they make just about everything.” •

26 L I C E N S E ! A U G U S T 2 0 0 5

with the outside help of Siegel and Michael Stone (co-founders of The BeanstalkGroup, but both with Hamilton Projects at the time).

But, like other licensing businesses, Harley-Davidson’s consumer productsarm matured. “I’d say in the last eight years, the licensing business overall haschanged. It is now a defined business,” says Crowley, who, prior to joiningHarley-Davidson more than five years ago, held retail positions with the likesof Universal Studios and The May Department Stores Company, among othercompanies. Since her arrival, Crowley and Parsons (who returned to the licens-ing division in 1999, after working in other departments such as productdevelopment and financial within Harley-Davidson) have worked together tostreamline the licensing process, manage distribution channels, and ensure theconsumer products are relevant to the Harley-Davidson brand. “We are veryjudicious about how we approach our licensing business,” continues Crowley.“It’s about the history and heritage of the brand.”

Currently, Harley-Davidson works with 100 licensees (“a comfortable andmanageable number for us,” say Crowley and Parsons) ranging in product cate-gories from children’s (Haddad) to footwear (Wolverine), pet supplies (CoastalPet), bicycles (Toys “R” Us), children’s ride-ons (Fisher-Price), knives (UnitedCutlery), and lighters (Zippo). “We don’t slice and dice product categories.There is no licensee competition within categories,” says Parsons, noting, however, that there are three T-shirt licensees simply because the demand inthat product category is overwhelming. “One of the success drivers of theHarley-Davidson licensing program is that Harley-Davidson has cultivatedlong-standing relationships with a number of its licensees,” says Siegel. “Theselicensees are invested in the success of the program and dedicate great resourcesto ensuring prime presentation at retail for Harley-Davidson licensed products.”

Indeed, Harley-Davidson is strategic with its program. “Relationships andpartnerships are the key,” says Crowley. “Our main concern is maintaining the

“machines,” and spendsignificant monies annually on their ridesand wares—from cus-tomization to consumerproducts.

REAL HARLEYFor Harley-Davidsonmotorcycle owners, partic-ularly those interviewed forthis story, there is no otherride. Wanting to ensurethat its trademarks andlogos were protected some23 years ago, Harley-Davidson implemented aconsumer products program. “When Harley-Davidson first thoughtabout licensing, it primarilyfocused on using licensingas a means to protect itstrademark from an abun-dant number of infringers,”recalls Beanstalk’s Siegel.Concurs Crowley, “As aplaceholder in time, in the1980s, many companiesused licensing as an offensive measure toinfringement.” So new tothe licensing business wasHarley-Davidson thatParsons, a CPA prior tojoining the company, was aone-man in-house licensingact back in 1982, working

“Harley-Davidson has cultivated long-standing relationshipswith a number of its licensees. They are invested in thesuccess of the program and dedicate great resources toensuring prime presentation at retail.”

—SETH SIEGELCHAIRMAN, THE BEANSTALK GROUP

28 L I C E N S E ! A U G U S T 2 0 0 5

and are contractuallyobligated to sell Harley-Davidson product intopreapproved retail chan-nels with preapprovedretail partners, accordingto Siegel. Crowley andParsons concur, mentioning that broaddistribution is not alwaysthe right fit for Harley-Davidson, and theyencourage the product tobe delivered where it ismost relevant. It’s the reason why, for example,children’s products areavailable at Toys “R” Usas it is the No. 1 sourcefor children’s products,according to Crowley.“With Toys “R” Us, thatrelationship has workedbecause it’s vertically inte-grated, and much of themanufacturing is done byit,” she explains. Similarly,Harley-Davidson has adeal with Hallmark forstationery and gifts. “Wecould have placed thoseproducts all over theplace, but that wouldminimize the impact.Hallmark is manufactur-ing the products and selling to its distributionchannels. It leaves lessroom for error,” she

integrity of the Harley-Davidson brand.” Crowley further comments thatalthough it may be the tactic of some companies in the licensing business togenerate money at any cost, “that comes with significant risk to a brand andcertainly is not the Harley-Davidson strategy.”

HARLEY NETWORKIntegration is key to the Harley-Davidson program. The licensees Harley-Davidson chooses as partners have established relationships with key retailers

BUTCHY WOULD RIDE much more often if it weren’t for some aches and

pains. At 67, this now-retiree has been riding for upward of 50 years. Amazingly

for this avid Harley-Davidson loyalist (he’s owned seven different Harley-

Davidsons over the years), the pain seems to fade when he’s riding. He’s

customized his ride in a true American fashion with an American flag paint

scheme on the bike, and a rebel flag flying. Butchy says owning a Harley-Davidson

is an expensive habit, but one he enjoys as he spends more than $1,500 annually

on aftermarket and other accessories (including a stuffed Harley-Davidson teddy

bear that adorns the handlebars). “They are the best-looking bikes around,” he

claims, adding that Harley-Davidson needs to produce a radio that will fit on the

handlebar. He’s been searching, and apparently the radio is coming soon. Then,

he can ride with the wind in his face and some tunes. •

30 L I C E N S E ! A U G U S T 2 0 0 5

continues. Asked if the deals with both Toys “R”Us or Hallmark are exclusive, Parsons replies sim-ply, “They are not retail exclusives. We haven’t goneto the competition. We are partner oriented.”

At the core of the Harley-Davidson retail pro-gram are dealer networks. There are more than1,300 Harley-Davidson dealerships in 60 countriesworldwide, and each is more than just a place tobuy motorcycles. “Harley-Davidson dealerships area key retail channel for the licensing program, andthe protection of Harley-Davidson’s relationshipswith its dealers is at the forefront of the program,”comments Siegel. In a time when licensors haveestablished retail development teams and are strik-ing the deals with retailers (somewhat eliminating apast licensee role), Harley-Davidson works differ-ently. To some extent, Harley-Davidson licenseesmust be interconnected with dealer networks todeliver product globally. “Licensees are invested inthe success of the program and dedicate greatresources to ensuring prime presentation at retailfor Harley-Davidson licensed products. To facilitatethis process, Harley-Davidson provides its licenseeswith style and packaging guidelines to drive seamless product development, a logo—designedspecifically to denote an official Harley-Davidson

licensed product—and access to the Harley-Davidson design team.”

“For our dealer networks, our programs are customized to individual stores,” says Crowley.“That’s because our customers are different all overthe world. We consider consumers as individuals,not as sales. Our customers are different from NewYork City to upstate New York and from Californiato Pennsylvania and Washington, D.C. As we gothrough product development, there are manydemos and types that we must keep in mind. For

NYPD DETECTIVE STEVEN, 41, owns two

Harley-Davidson bikes—a V-Rod (shown here) and

an Ultra Classic Electra Glide—“because I can.” And

what else can he own? Try jackets, T-shirts, hel-

mets, gloves, tools, telephone, clock, mugs, framed

photos…the list goes on and on. He’s customized

his bikes and spends approximately $2,000

annually on accessories. As a tribute to 23 fellow

police officers who died on 9/11, Steven had an

eagle from heaven painted on his bike that

features 23 stars. “I’m big on symbolism, and

Harley-Davidson is a symbol of America,” he says

proudly, adding that his “Americana” feeling,

besides being American, stems from his years of

working in some sort of American government

capacity—from the military until now. He attends

motorcycle events in Daytona, FL; Lake George,

NY; and will attend the Sturgis, SD, event for the

first time this month. His request for Harley-

Davidson is for a water-cooled touring bike, which

he certainly would buy… because he can. •

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example, in Japan, product is made exclusively and sized specifically forJapan. Throughout Europe, there are different fit preferences.” ClarifiesParsons, “But the brand attributes are global.” And, he adds, on the retailfront, “We’re a motorcycle company, and our distribution partners don’t liketo see our brand on sale.” To that end, Crowley and Parsons explain thatevery dealership store size is different, therefore, Harley-Davidson will sendout suggestions to those networks as to how to optimize product perform-ance, providing dealerships with display ideas. Dealerships use very little, ifany, point-of-purchase materials. Besides integrating dealerships withlicensees, licensees can be integrated with other licensees. For example, plushmay be paired with children’s apparel. “Our story is about the whole brand,”notes Crowley.

In certain territories, such as Las Vegas, NV, the Harley-Davidson dealership also owns and operates Harley-Davidson retail stores that areconsumer product oriented. These stores are strategically placed in keyhotels or the Las Vegas Convention Center, and delivery of product tothese channels is consistent. Hence, the reason licensees are very muchlocked in with dealer networks. Beanstalk’s brand managers work “toensure that all licensees are trained in the nuances of the brand and thatlicensed products appear seamless across all categories and are compatiblewith Harley-Davidson’s strategic vision and technical specifications,”according to Siegel. In addition, he says, “Harley-Davidson licensees meettwice a year at semi-annual dealer shows where dealers have exclusive accessto preview and order licensed products.”

Further, Harley-Davidson works with licensees to ensure distribution atother relevant channels of distribution, department stores, for example,where Harley-Davidson merchandise is sold. At those channels, Crowleyexplains, shop-in-shop environments are not a preferred method for presentation.

RIDE ONThe Harley Owners Group (H.O.G.), established in 1983, and the BuellRiders Adventure Group (BRAG) are home to more than 900,000 membersworldwide. And home is the best way to describe these organizations (ourreal riders say there’s a camaraderie among riders), as they are an extendedfamily of riders who are offered attendance at a variety of events and rides, aswell as other member benefits. Harley-Davidson also has its own FinancialServices department, established in 1993, to aid prospective and established

riders with owning aHarley-Davidson.

Crowley and Parsons,as well as other membersof the Harley-Davidsonteam, remain close withcustomers by attendingmore than 20 differentevents throughout theyear. Harley-Davidson

also is very muchinvolved in communityand philanthropic efforts,such as monies for milesfor the MuscularDystrophy Association.

And while Harley-Davidson reaches out toits customers, customersalso reach out to Harley-Davidson. Crowley andParsons relate that when

“The beauty ofour customerbase is they areloyal and expectthe best fromHarley-Davidson.”

RUTH CROWLEYVP, GMM, CONSUMER PRODUCTS

HARLEY-DAVIDSON

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experience as “all of the senses are activated when you are riding.” While growing up with a new generation of customers is on the minds of

Crowley, Parsons, and Siegel, there remains a wealth of already establisheddie-hard Harley-Davidson enthusiasts. “The beauty of our customer base isthey are loyal and expect the best from Harley-Davidson,” says Crowley.“That’s why we manage the consumer products business as telling Harley-Davidson stories, rather than just pushing products through the door.” AsHarley-Davidson continues to introduce new rides, aftermarket merchandise,and consumer products worldwide, that’s a story continuing to unfold. ©

they opted to launch petaccessories—bandannas,leather jackets, goggles,among other items—fordogs, they received feedback from customerssaying they were discrim-inating against cats.Harley-Davidson, ofcourse, listened.

License! had to ask whatwas coming down theroad from Harley-Davidson, in terms of new products or categories. Crowley istight-lipped but mentionsa youth initiative. “Part ofHarley-Davidson’s currentlicensing strategy is tocultivate the next genera-tion of Harley-Davidsonenthusiasts. Together withBeanstalk, Harley-Davidson currently isworking to develop acomprehensive programfocused on tomorrow’sriders,” says Siegel.Indeed, for Crowley and Parsons there exists a fourth target demographic: youth.“They love the fact thatthe brand is authentic.And, it’s aspirational,”says Crowley, who, by the way, enjoys theHarley-Davidson riding

A HIGH SCHOOL English

teacher by profession, Mike also

is a bodybuilder and has been

riding since 1969. He’s owned

numerous bikes over the years,

from a Triumph Bonneville to a

Honda Shadow, and in 2002

bought his first Harley-Davidson

(a Softail Standard, shown here)

when he finally could afford to

own one. “Now, I wouldn’t ride

anything else,” he says. To that

end, for his recent 55th birthday,

he treated himself to a Road

King Classic, which he will ride to

the Sturgis, SD, event from

Brooklyn, NY. Asked why he

rides, he jokes, “To get away

from my girlfriend.” Actually, it’s

for the speed, independence,

freedom, and camaraderie. He’s

already spent more than $2,000

on some customizing options for his new Road King, and spent more than $8,000

customizing the Softail in some way over the years. He believes Harley-Davidson

“makes just about everything as far as apparel and accessories” are concerned,

but believes Harley-Davidson should increase the size of its stock engine, some-

thing he did with the Softail and plans to do with the Road King. •